Moving ahead on its Budget announcements, the finance ministry has floated Cabinet notes for hybrid foreign direct investment instruments and change in norms for FDI for non-banking financial companies (NBFCs).

The two notes are likely to be taken up by the Union Cabinet soon, officials said.

“We have floated the Cabinet notes for hybrid FDI instruments and the proposal to allow more NBFC activities beyond the current 18 under the automatic route. It is likely to be taken up in the Cabinet soon,” a senior government official said.

The hybrid FDI instruments will include debentures, optionally convertible or partially convertible, along with Foreign Currency Convertible Bonds, another official said. Foreign Direct Investment through these hybrid FDI instruments will be part of the respective sectoral FDI limits, the official added.

Finance minister Arun Jaitley in his Budget speech for 2016-17 had said, “the basket of eligible FDI instruments will be expanded to include hybrid instruments subject to certain conditions.” The Budget had also stated that FDI will be allowed beyond the 18 specified NBFC activities under the automatic route for other activities which are regulated by financial sector regulators. At present, FDI can only be made into shares, fully and mandatorily convertible preference shares and fully and mandatorily convertible debentures by persons residing outside India.

Last month, the government announced changes in FDI norms across nine key sectors including ease in FDI caps for defence, aviation and food processing sectors. Among other changes, the government did away with the need for prior government approval for up to 74 per cent FDI brownfield investment in pharmaceuticals and removed the condition of access to ‘state-of-the-art technology’ for FDI in the defence sector. The government last made changes to the FDI policy in November 2015, when norms for 15 sectors including banking, defence and construction were changed.

India’s FDI inflows in 2015-16 had increased to record $55.46 billion as against $45.15 billion in 2014-15 and $36.04 billion during 2013-14.